Mutual Debt Essay

1340 Words 6 Pages
“It is quite clear on the law that there can only be compensation or set-off in the case of mutual debts, each is liquidated, absolute and presently due.”

In Ford Brothers v Clayton and Clayton the requirements were expressed as follows:
“Where a claim is disputed especially upon grounds which affect the very basis upon which it is framed, it can hardly be said to be promptly established. Such uncertainty as existed in this matter appears to me as fatal to the existence of a right of set-off until the dispute is settled and this uncertainty dispelled by the judgment of a competent Court.”

Taking cognisance of the cases mentioned above, the following factors are generally recognised as the requirements for set-off:

(a) The debts must exist mutually between the same persons;
(b) The debts must be of the same nature (for instance, in money or in goods of the same nature and quality: one cannot set-off apples against pears);
(c) Both debts must be due and enforceable (no valid defence could be raised against a
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Was this the case on the 1st September, 1900? To ascertain that we must have regard to the terms on which he obtained his loan. He bound himself “to pay the aforesaid loan within five years from date, along with interest at 3 per cent, payable at the Treasurer-General’s office”. So that he had five years within which to pay the money, and upon the face of the document the Government could not have demanded it until the five years had expired. He might have paid sooner had he wished. But the Government had no right to demand payment from him until the five years had elapsed. And as those five years had not expired by the 1st of September, 1900, it is clear that on that date there was no debt due by the defendant to the Government. And if that be so, set-off cannot

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